Ag Secretary Tom Vilsack wants to see if the Agriculture Department’s county employees can intervene before a producer is at risk of foreclosure. And he’s got Inflation Reduction Act funding to help him give it a shot.
“Instead of waiting for a foreclosure action and creating an adversarial and tense relationship between (the Farm Service Agency) and the borrower because the borrower is having a little difficulty, we're now in a position to work with that borrower and provide them time and assistance and help to get them to a better place to keep them on the farm,” Vilsack told reporters Tuesday.
The funding for his plan will come from the $3.1 billion earmarked in the IRA for debt relief for financially stressed farmers. Vilsack detailed the plan along with announcing Tuesday that the department was providing $800 million in near-term IRA debt relief.
Vilsack said FSA’s county loan officers — staffers he praised as being “really good at what they do” — can identify warning signs and address a producer’s situation before the words “foreclosure” or “bankruptcy” enter the conversation.
Tuesday’s announcement totaled about $1.3 billion: about $600 million for electronic payments to make 11,000 farmers current on their loans; a $200 million fund to help farmers who have already faced bankruptcy but still might be subject to Treasury Department withholding action; $66 million to make current the loans of 7,000 producers who utilized certain COVID assistance; and the remaining approximately $434 million to give FSA the flexibility to mitigate foreclosure actions.
That final pot of money could face special importance if the Biden administration's foreclosure moratorium is not extended. For many producers faced with the prospect of a lifted moratorium and loan payments coming due, help might be needed.
For that help to be provided, Vilsack envisions a scenario where local FSA officials are working on a case-by-case basis with producers
“I don't anticipate and expect at this point that we're dealing with any kind of application process,” he said. “We're dealing with folks sitting across the table from one another, saying ‘OK, let's figure this out, let's figure out how we can get you in a better place.’”
Of the roughly 115,000 producers who have loans through USDA — financing Vilsack pointed out is often extended after other options are exhausted — about 15,600 borrowers have been identified as needing USDA’s new proactive regime. The vast majority of that total, about 14,000 producers, will have the option of requesting speedy intervention to address loan servicing issues; the remaining 1,600 are more complex cases that might include more imminent bankruptcy or foreclosure.
The program comes as the Biden administration and congressional Democrats have worked to address the debt faced by producers, particularly those of color. Last year, Congress passed the American Rescue Plan and its plan to forgive the debt owed by minority farmers. The language ultimately signed into law created a program to pay off the debt owed by socially disadvantaged producers and another 20% to each recipient to deal with the relief’s tax implications.
But under the IRA, that plan was repealed following pushback in the courts. Included instead was language for a $3.1 billion program aimed at “distressed” borrowers and a separate $2.2 billion effort for producers who experienced discrimination through USDA’s lending programs. Vilsack said the latter program is in the implementation process, and federal officials are sorting through several vexing questions as they determine how to distribute the funding.
“This isn't the first time the federal government has provided compensation” to address past discrimination, Vilsack pointed out. Specifically, he referenced the Pigford case that compensated Black farmers, the Keepseagle case for Native American producers, the Love case for female producers and the Garcia case for Hispanic producers.
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Over the course of those settlements, Vilsack said about 25,000 people had received payments, with some receiving as much as $250,000. “The question is, do those folks come back and are they able to get a new opportunity?”
“So there's an opportunity here, I think, for us to address the issue of discrimination separate and distinct from what we're talking about here,” he added.
Under the IRA, there is no prohibition on a producer receiving assistance via both the distressed borrower assistance detailed Tuesday as well as the pending discrimination program yet to be announced, he said. However, the new relief does not account for tax implications, something Vilsack said individual producers would need to address with their accountants.
The success of Vilsack's FSA plan — and the ability of a thinning USDA workforce to carry it out — is yet to be determined. The midterm elections could also put Republicans at the head of the House or Senate Ag committees — or both — and offer conservatives the chance to curtail the new strategy and the money required to fund it. The top two Republicans on the panels — Rep. Glenn Thompson, R-Pa., and Sen. John Boozman, R-Ark. — did not respond to requests for comment.
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